Let me present some of the arguments for letting a region entity be
in a player's faction:

Existing persuade/terrorize mechanism can be used to
get location to swear to you.

Excessive taxation or pillaging drives down loyalty. Thus
it is in the interest of the ruler to keep the people happy.
If they "rebel" they will renounce loyalty to the lord.

Impress can bypass the recruit mechanism and steal men from
the province. Players feel offenses against their regions
more acutely if the regions are actually in their faction.
More than "so what, my revenue will be 6% lower next turn."

Provinces can declare attitudes which will let people
pass through or bar them at the borders.

I would like to have other top-level structures such as ships
be commanded directly with their own entity section in the orders.
You would issue MOVE orders to the ship, not to any characters on it.
Issuing orders for a region fits into this plan, it's not as strange
as it seems at first.

The one part of this plan which I don't like is that there isn't
much of a use for castles and towers (Scott pointed this out). Steve
Chapin thinks the province should be fortified directly; walled cities
and such.

Here are some of the criterial I'm using to judge ideas:

It should be hard to claim a location. Players shouldn't
run off into the countryside at the start of the game trying
to FORM as many units to stack with every unoccupied location.

1) The required castle plan is the best here.
Gives a good reason to invest all of the time
and money to make a castle.

2) Having to persuade locations works here too.

3) Having initial NPC rulers is my least favorite.
Plans which require NPCs to function make me
nervous; they generally require more implementation
effort for the effect gained.

TAXing shouldn't be all cake an ice cream. The ruler should
have an interest in keeping his people happy.

1) All of the plans will decrease the revenue
base with excess taxation.

2) The regions-in-your-faction plan works well here,
since if the location renounces loyalty to you,
this is a "rebellion" and you will be ejected
from the stack.